Goldman Sachs Favors Nvidia and Broadcom as Top AI Stocks to Buy

Goldman Sachs analyst James Schneider has initiated coverage on Nvidia (NVDA) and Broadcom (AVGO) with Buy ratings and price targets of $185 and $315, respectively. Schneider sees room for further upside due to their positioning in the next phase of artificial intelligence investment, citing their leadership in AI infrastructure and custom silicon. Both stocks are already up more than 20% year-to-date and are expected to contribute significantly to their respective companies' revenue by 2026.

Goldman Sachs analyst James Schneider has initiated coverage on NVIDIA (NVDA) and Broadcom (AVGO) with Buy ratings and price targets of $185 and $315, respectively. Schneider sees room for further upside due to their positioning in the next phase of artificial intelligence investment, citing their leadership in AI infrastructure and custom silicon. Both stocks are already up more than 20% year-to-date and are expected to contribute significantly to their respective companies' revenue by 2026.

NVIDIA: The AI Chip Monopoly

NVIDIA's Q2 2025 results highlight its dominance in the AI chip market. Revenue hit $30 billion, a 122% year-over-year surge, with its Data Center segment—driven by AI—accounting for 88% of total revenue at $26.3 billion [1]. The company's Hopper GPU architecture and upcoming Blackwell AI superchips are game-changers, with Blackwell already being adopted by cloud providers and hyperscalers [1]. NVIDIA's shift to a software-as-a-service (SaaS) model ensures recurring revenue streams. Despite margin pressures, operating income rose 10% sequentially to $18.6 billion, and its full-year margin guidance of "mid-70%" suggests the company can weather R&D and operating costs [1].

Broadcom: The AI Foundry

Broadcom, on the other hand, is the foundry powering the AI boom. As the sole manufacturer of cutting-edge AI chips, it is the gatekeeper to advanced node technology. In Q2 2025, Broadcom guided revenue to $28.4–29.2 billion, a 38% YoY jump, with its High-Performance Computing (HPC) segment soaring on AI demand. Advanced nodes (3nm/5nm) account for 73% of wafer revenue, and its upcoming 2nm process will deliver 35% more performance and 50% more power efficiency than 3nm [1]. Broadcom's $100 billion U.S. investment and 2nm roadmap ensure it remains the only foundry capable of mass-producing chips at 2nm and below.

Why the Structural Advantages Outweigh Risks

Both companies face headwinds—NVIDIA's margin pressures and Broadcom's margin dilution—but their secular tailwinds are unstoppable. AI's insatiable hunger for compute, software monetization, and no real competition position them as the ultimate beneficiaries of the AI infrastructure boom [1]. NVIDIA's software stack and Broadcom's manufacturing supremacy ensure they'll dominate AI infrastructure for years.

Investment Thesis: Buy the Dip, Hold for the Decade

Both stocks are undervalued relative to their growth trajectories. NVIDIA trades at a P/E of ~35, while Broadcom's P/E of 25 reflects market concerns over margin pressures. However, with AI revenue set to hit 30% of Broadcom's total revenue by decade-end, these stocks are cheap at current levels [1]. NVIDIA: Target $750–$800/share (up from $580 at time of writing). Broadcom: Target $250/share (up from $180).

Investment advice:
- Buy on dips: Both stocks will see volatility over geopolitical risks and quarterly margin swings. Use pullbacks below $550 for NVIDIA or $170 for Broadcom as buying opportunities.
- Hold for the long term: These are decade-long plays.

Conclusion: The AI Infrastructure Play is a No-Brainer

The AI boom isn't a fad—it's a seismic shift in computing. NVIDIA and Broadcom are the architects of this new order. With $30 billion+ in quarterly revenue, margin resilience, and no credible competition, they're the safest bets for investors seeking to profit from the AI era. The road ahead may have potholes, but the destination is clear: a future where every enterprise's AI stack runs on NVIDIA's chips and Broadcom's silicon.

Final call: These stocks aren't just for 2025—they're for the next 20 years.

References:
[1] https://www.ainvest.com/news/silicon-architects-ai-revolution-nvidia-tsmc-unmissable-bets-2025-2507/